Robert Walters shares back in demand

In keeping with its preference for trading statements that are both short and sweet, Robert Walters (RWA) needed just 50 words this morning to trigger another surge for shares in one of the City’s top performers of 2017.

It’s the third time since the summer that the professional recruitment consultancy has surprised on the upside, having forecast today that annual profits will be materially ahead of current market expectations.

The company’s shares have rallied by more than 140% since the shock of the Brexit vote in 2016 and are up 75% in the past year. Today’s brief update was sufficient to lift the stock by another 10% to 610p.

This is a cyclical stock that is exposed to the unpredictable nature of political events and economic fortunes, but for the moment the City is prepared to bet that there are more gains in the pipeline.

Investec Securities described the Robert Walters valuation as attractive, noting that it trades on 1.1 times enterprise vale/net fee income versus a peer average of 2.4.

This has prompted Investec to upgrade its price target by 70p to 670p and reiterate its ‘buy’ rating. It is the sixth time in a year that Investec has raised its earnings per share (EPS) target, on this occasion by 8% and 5% respectively for 2018 and 2019.

Over at Liberum, analysts expect group pre-tax profits to increase by between £3 million and £4 million, implying an increase in consensus forecasts of around 10%.

Robert Walters generates two-thirds of its net fee income from permanent employment posts, with the remainder coming from contract positions.

Its growth has been spread across geographic regions, with October’s third-quarter trading update showing constant currency growth of 14% for Asia Pacific, 15% in the UK and 31% in Europe. Asia Pacific is the biggest division, with revenues of £35.8 million for the three-month period.

In London, activity levels have been highest across technology and legal recruitment. The UK regions also delivered good growth, with St Albans and Manchester the standout performers.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.